If you're part of a fast growing startup it can sometimes feel like your job is to help add floors to a never ending skyscraper.
I like the comparison between building a large structure and working at a startup since it fits nicely with my experience at my previous company.
At a hyper growth stage startup you have different teams working together to build a bigger and stronger asset (or set of assets) for the organization, similarly to a team constructing a skyscraper.
If you're part of such an organization then you may get the feeling every now and then that, as you add more floors to the building, no one is making sure that our skyscraper has a solid foundation. The business unit responsible for addressing this concern is business operations.
Making sure the organization has efficient processes, the right tools, and enough data to work with are some of the responsibilities of business operations.
The goal of this post is to give you the information you need to add business operations to your startup today.
What is business operations and do I really need to invest in it at my startup?
The goal of business operations is to help the organization get more value from it's assets. These assets include human capital, the tools used by the organization, and data being collected.
In other words your business operations team's responsibility is to make your company more efficient.
Let's say that you have a marketing manager in your company. Let's imagine this manager spends a day a week preparing reports for a weekly meeting on the performance of the marketing department.
Now imagine this manager is earning $150,000 a year. One day a week equals 20% of that employees time which equates to a cost of $30,000 to your business every year. I'm sure you'd agree that $30,000 is a premium to pay for such an outcome and you're better off dropping that cost.
This is only one example but I'm sure you could come up with 10 examples in a few minutes on how your organization could run more efficiently.
Imagine having a team of specialists actively searching out these inefficiencies and helping you drop these costs. How much extra resources would your organization have if these efficiencies are eliminated?
Getting started with business operations
If you're an early stage startup which wants to start investing in business operations then you should follow the recipe I've laid out for you below.
- Make a commitment
- Decide on your model and teams
- Find your business operations champion
- Perform an operations audit and start hiring
- Build a road map
- Get to work
Step #1 - Make a commitment
The first thing you need to do before you can get started building out your operations is to make a commitment to the effort.
Building out a fully functioning business operations unit within a company is not a small feat. Adding business operations to a company costs a lot of money and time and there will be ups and downs like any major effort.
Expect to wait 4 - 12 months before seeing significant returns on investment and once you get started, it will be an ongoing effort with continues investment. You'll need to hire experienced individuals for complex roles and invest in their personal growth and career paths.
Building out business operations is a major commitment and you need to be all-in or all-out.
Step #2 - Decide on your model and teams
This step is more complicated than it seems. There are a number of different approaches that you can take to build out your business operations.
I'm sure there are more models but I've listed the models I've seen in my career in the list below:
- Centralized Model - One department with different teams serving the organization.
- Decentralized Model - Different teams serving the organization, no formal business operations department.
- Departmental Operations - Each department has its' own operations individuals. These individuals are part of their respective departments. No centralized operations department.
- Hybrid Model - Combination of centralized and departmental operations. Some ops employees belong to the department, others are in their own team under business operations.
The different business operations responsibilities
There are a number of ways to divide up your responsibilities of your business operations personnel.
From a high level you can divide the responsibilities into the following:
- Business intelligence - Help the organization become more data-driven. Your business and/or data analysts will lead this effort and work closely with R&D.
- Departmental operations - Help specific departments with their operational needs (think marketing automation in the marketing department, and prioritization and workflow in the support team).
- System administration - Administration of any company-wide tools or systems. A common use case is CRM management.
- Cross departmental initiatives - Project management of projects involving multiple departments. An example would be the marketing-sales handshake or building a feedback loop between customer success and the product team.
There is a lot to consider when deciding on which model and teams you want to use. You will want to get feedback and buy-in from your different VPs and see which approach works best for your culture and organization structure.
Since you will be starting from scratch you also need to decide which departments or projects you want to focus on first. I'll discuss how to handle this in the section on the operations audit below.
One model to consider - The Hybrid Model
Below is one possible model for you to consider. This was how the operations were structured at my previous company.
We had two business operations teams, Business Intelligence (we called it the Business Performance Team) and the SalesForce Admin Team.
These teams reported directly to the COO. These two business operations teams were neutral, non-biased and had the responsibility of serving the entire organization.
In addition to these two teams, each department had its' own operations specialists which worked very closely with the two operations teams. These ops specialists were members of their respective departments and directly reported to the VPs of these departments.
Cross-departmental initiatives were usually jointly owned by the BI and SF Admin teams or just under the ownership of the BI team.
This model worked well but every model has its' own pros and cons which you'll need to balance against.
One major advantage of this model is the fact that the two business ops teams are directly under the COO which was important to establish a single source of truth for operational metrics and processes.
By centralizing these two teams there was more information and skills being transferred between the team members.
Notice that this model doesn't have a VP of Business Operations. This was one major weakness in this model. I recommend finding your business operations champion that will be responsible for pushing the business operations vision forward.
Step #3 - Find your business operations champion
Congrats, you've made the decision to invest in building out business operations.
The first major step is to find a champion that can lead this effort. There are a few ways to go about this.
The right move might be to hire a VP of Business Operations. This is usually a timely and expensive step and I would ]recommend considering an alternative approach. That approach is to give the responsibility to an existing employee.
Take a second to think who in your company could fit this role and if no one immediately pops in your head then start looking for your champion in the market.
The right individual is someone who is very technical, data-driven, a natural problem solver and very familiar with your type of business. Strong project management skills, good with people and high EQ are also critical traits.
This individual should report directly to either the CEO, CTO, or COO.
Once you've found your champion it is critical that you lay out their mandate as clearly as possible. Communicate your vision and what you expect to see over the next 1, 3, 6 and 12 months. Map out how you see the ops in terms of teams, responsibilities and consumers.
Below are some questions to consider at this stage:
- Which departments are we going to focus on first?
- How many analysts, system admins and ops specialists do we need now? How many in 12 months from now?
- How many analysts, system admins and ops specialists can we afford?
- Do we want to hire juniors or seniors?
- What are the major milestones for business ops over the next 12 months?
Once you've laid all the details on the table the champion can get to work on auditing the business and building the relevant teams.
Step #4 - Perform an operations audit and start hiring
The next steps for your champion are to audit the business and start hiring a senior business analyst.
The reason your champion needs to do an audit of the business is to allow you both to understand the current state of the business in terms of operational efficiency. The audit should include the following:
- Audit of the tools being used by the organization
- A data audit
- Departmental needs and wish lists
- Cross-department handshakes
Audit of the tools being used by the organization
Now is a good time for someone to map out the different tools being used in the organization. The audit should try and answer the following questions:
- Which tools are the company paying for?
- Do these tools have assigned owners?
- Are these tools being utilized as expected?
- which tools can we stop using?
You want to be sensitive here since people get attached to their tools. It is important to understand that this stage of the process is for information gathering. You want to get a big picture view of how the company is functioning, not to sway opinions.
The idea behind this step is to map out the tools in the company so together with your champion you can build a plan to optimize the usage of these tools or to get rid of some of them altogether.
Perform a data audit
I've written extensively on how to perform a full data audit of your startup. This is a critical step in the audit since a lot of effort in the first 12 months will go towards filling in gaps in your BI infrastructure.
A good tip is to use a tool like Lucidchart to map out your company's data silos and gaps. You will need to involve a lot of people in this stage of the operations audit but take your time and map out all the necessary details.
Filling in the data gaps will be a major expense for the company. In order to build a comprehensive road map it's important to understand the priority of these gaps and the costs involved in filling them in.
Start hiring your first senior business analyst
A very strong senior business analyst will make all the difference in the world to your progress building out your business operations.
The truth is that building out business operations is a major challenge and your champion can't do it alone.
A senior analyst will be able to take on a lot of responsibility and act as both an analyst and project manager.
This individual can help with hiring the next analyst (preferably another senior analyst), help with better understanding the data gaps, and even some CRM admin work.
You need more of a generalist at this stage of the process and a strong senior analyst is a better fit than a system admin or project manager.
Depending on the job market in your part of the world it can take anywhere from 1 month to 6 months to find a strong senior analyst so keep that in mind.
This position is critical since it will set the pace of the BI team and your operations efforts in general. Take your time and make sure you hire a superstar. Here are some great business analyst interview questions to help you out. You should also check out my detailed guide on how to hire your first business analyst.
Department needs and wish lists
The next step in the audit is for your champion to meet with the different VPs of the major departments and ask them about their operational needs.
This step should help identify the biggest pain points for each major stakeholder. Addressing these pain points will help get buy-in and support so instruct your champion to pay attention and write everything down.
Make sure that he uses this opportunity to explain the vision and what you plan to achieve. Make sure he emphasizes that it will take time to implement the vision and that a lot of patience will be needed.
During the interviews with the VPs questions about cross-department handshakes and other important processes should be asked. Your champion should map these out and assess how they are working today.
Cross-department processes are usually full of issues and difficult to optimize. These processes will become a major focal point in the future so now is a good time to get a overall picture of these handshakes.
Bring it all together
The ops audit will most likely take 1 to 3 weeks to complete.
Once completed you and your champion should block off 2 - 4 hours to go over the audit. The goal is for you to get a high-level understand of where the company is in terms of operations and to start building a operations road map.
Build a road map
At this stage you should have all the information you need to start building a road map with your champion. This road map will become the main action plan for the next 6 to 12 months. The goal should be to use this first road map to get the necessary building blocks in place so that you can start scaling the operations.
You also want to get the team to the point where it's no longer reactionary but instead proactive in how it provides its services.
This road map should include the following themes:
- Hiring plan - Which roles do we need to fill in now, in 6 months, in 12 months, etc.
- Data infra plan - A clear road map to fill in the necessary data gaps
- Data warehouse plan - A plan to establish a data warehouse
- Process projects plan - A list of projects relating to key processes that need attention
- Tool reorganization plan - A plan to change the usage and ownership of specific tools in the company
It depends entirely on the size, type, organizational structure and culture of your company but you should aim to try and hire a small number of very strong ops people in the first 12 months.
If you have the budget then let 2 or 3 departments start looking for senior operations specialists or senior analysts (depending on your model). The champion should be involved to help determine if candidates match the criteria and expectations of the roles.
If you can bring in team leads or directors for each of the ops teams (once again, it depends entirely on the model you want to build) then these individuals can help lead efforts in their respective areas, including hiring.
If you want to start small then start with your BI and system admin teams. These teams can serve all the departments and you can later transition to a department-only or hybrid model.
Data infra plan
The data infra plan involves building out an action plan to fill in critical data gaps in your company's infrastructure. This usually involves implementing new tracking tools, collecting new data, and even major changes to database schemas.
This plan can take many months to complete, depending on the majority and BI-friendliness of your product's data infrastructure.
A strong R&D team can make all the difference here.
Data warehouse plan
A company which makes to be data-driven needs a data warehouse. This is a major project that involves either hiring data engineers or using outside consultants.
The data warehouse project should be led by a strong project manager with experience in this area. If needed you should bring on a consultant to assist you.
Process projects plan
Your operations road map should include some projects related to improving certain business processes. These processes don't necessary have to be cross-departmental but you should focus on the processes which are having the biggest impact on the business.
The idea here is for your champion to use one of his analysts to investigate the process and see how it can be optimized. The goal should be to only focus on processes which if improved, will have a major impact on the business.
Tool reorganization plan
The tool reorganization plan is the least important part of the road map. With that being said there are often a lot of low hanging fruit improvements which can be made with minimal effort.
Focus on the tools which affect the most people and cost the most to the company.
All your major tools should have clear owners and these owners should have an incentive to improve their expertise with these tools. This will help improve the ROI from each tool.
Communicate the road map to senior management
Once the road map is completed your champion should schedule meetings with senior managers to communicate the plan. This will help with getting support, valuable feedback, and to set expectations.
This is an important step so don't skip it.
Get to work building your business operations
Now that the road map is completed and your champion and VPs understand what needs to get done it is time to get to work.
I want to emphasize that going from no operations to a team of experts actively improving the efficiency of your company will take time, money and a ton of patience.
Below is a list of 10 tips that will help make the first year as smooth as possible:
- Do what is needed to get your BI up and running as quickly as possible. Your ops specialists will need to rely more and more on data and you can alleviate a lot of frustration by investing heavily in your BI early on.
- If your champion lacks experience then consider finding him a mentor. This can make a massive difference to the effectiveness of your champion to get the job done.
- Make sure the different ops specialists are close. Make sure your HR understand that even though the ops specialists are in different teams and/or departments, they are all part of the same business function.
- The role of an operations specialist is very complex. You want to hire very strong candidates that are technical, good with people, organized, intelligent and hard working. Take your time with hiring for these roles.
- Some managers will get jealous and impatient. As the CEO / COO, you will need to step in and make sure that your managers are respecting the vision and model.
- If you run a global organization your champion and operations specialists will need to travel quite a bit. Set a travel schedule which makes sense for all parties involved.
- There will be conflict between product and operations when it comes to filling in data gaps. The reason is that R&D resources are limited and each ops task will take away from product's resources. You need to explain the importance of filling in these gaps to all parties. You will need to either scale R&D or make sacrifices on the product end.
- If your company is pre-seed then don't even bother thinking about operations, it's too early.
- If your company is pre-product market fit then focus on BI to help product better understand product usage and don't bother with anything else relating to operations, it's not a priority.
- If your company is in hyper growth mode then focus first on marketing and sales (growth), then client success (retention) and lastly product and finance.
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Thanks for reading.
Length of the e-book: 16 pages (2899 words)